US ethylene spot margins skyrocket on tight supply

08 April 2010 17:10  [Source: ICIS news]

Ethylene margins riseHOUSTON (ICIS news)--US ethylene spot margins soared to new highs this week, fueled by another jump in spot prices and a drop in feedstock ethane values, market sources said on Thursday.

Spot ethylene for April was heard traded on Wednesday at 74.00 cents/lb ($1,631/tonne, €1,223/tonne), rising from deals done in a range of 70.00-73.00 cents/lb last week.

The surge was accompanied by a steep decline in the price of ethane, the main US feedstock for ethylene, which fell by 13% this week amid looser supply.

Ethane traded early on Thursday at 51.375 cents/gal, down from around 59.000 cents/gal a week earlier. The drop was likely due to increased demand for heavier feeds, like propane, by cracker operators, sources said.

The drop in ethane prices combined with strength in the monomer have propelled spot ethylene margins to 53.3 cents/lb, a 13.6% jump from 46.9 cents/lb last week, according to the US ethylene margin report from global chemical market intelligence service ICIS pricing.

That increase came on the heels of a 23% margin surge last week, when ethylene spot prices unexpectedly soared by more than 10 cents/lb as a result of tight supply.

Ethylene margins for naphtha-based producers are virtually tied with ethane, as robust co-product spot prices have offset the latest uptrend in naphtha values.  

Naphtha margins were estimated at 53.6 cents/lb on Thursday, up by 4.3% from 51.4 cents/lb last week.

“The margins are unbelievable,” a producer said, adding that it mattered little what feedstock was being cracked.

Margins have never been this high except maybe very briefly after a hurricane, said another producer.

Market participants continued to attribute strength in US ethylene prices to lingering impact from outages earlier this year.

New maintenance taking place in April has also been cited as a factor lending support to the monomer.

Dow Chemical was said to have shut down its 499,000 tonne/year Plaquemine 2 cracker in Louisiana for a 50-day turnaround, while INEOS was heard to be doing maintenance at one of its US crackers in Chocolate Bayou, Texas.

The company has 1.8m tonnes/year of combined ethylene capacity at the site.

INEOS declined to comment on the procedure, while a Dow spokesperson did not respond to a request seeking confirmation of the shutdown at Plaquemine.

The outlook for ethylene points to continued strength, at least for the short term. Spot ethylene for May traded on Wednesday at 68.00 cents/lb, up from deals done at 56.500-58.375 cents/lb last week.

Ethylene for April was bid on Thursday at 72.00 cents/lb with no offers. May was bid at 66.00 cents/lb, also without attracting seller interest.

Chevron Phillips Chemical, ExxonMobil, INEOS, LyondellBasell and Shell  Chemicals are among the major producers of ethylene in the US.

Dow Chemical, Georgia Gulf, Occidental Chemical (OxyChem) and Total are among the buyers.

($1 = €0.75)

For more on ethylene visit ICIS chemical intelligence
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By: William Lemos
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